The specialist beverage, cereal and snack food processor is buying into the sports and adult nutritional formula business.
It has also teamed up with a Chinese company in Shenzhen Province planning to establish a spin-off venture to sell its Australia’s Own brand products, including infant nutrition lines, in China.
Another Freedom joint venture, Australian Fresh Milk Holdings, owns the nation’s biggest single-site dairy, Moxey Farms in Central West NSW, from where milk will be sourced for the new Shenzhen business products.
The new acquisitions are funded by a $75 million equity raising which kicked off last week when the first-stage institutional placement of shares at $4.45 each was over-subscribed.
The capital raising will also fund a $50 million takeover of the big northern Victorian milk packaging business, Pactum Dairy Group, at Shepparton.
Freedom, already a half owner, started Pactum in 2014 with local dairyfarming business Australian Consolidated Milk, which will remain a long-term supplier as the plant expands into protein powder ingredients, drinking yoghurt and cream.
Sydney-based Freedom is also breaking into the North American market.
It is in the throes of buying a controlling stake in a natural breakfast food company that supplies 11,500 specialty and natural food retailers in the US and Canada.
Managing director, Rory MacLeod, said full details of Freedom’s first production foray into North America would be spelt out when the transaction was finalised on February 17, the same day a $20 million purchase of an Australian sports nutrition formula maker will be wrapped up.
Meanwhile, Freedom’s new sports nutrition product business acquisition was expected to expand its offering in Australia, China and South East Asia to include beverages and snacks.
Its expansion into more nutritional product exports comes despite other high-flying players in the market, Bellamy’s Australia and the Blackmores-Bega partnership lately reporting tougher than expected sales conditions in China.
Mr MacLeod said Freedom’s partnership with China’s Shenzhen JiaLiLe Food Company – Australia’s Own Dairy Company China – would initially involve a 10 per cent investment worth about $4.3 million with an option to take up to 30pc of the business by 2019.
The AO China business would potentially see an international stock market listing «in the medium term».
The new company would source processed products from Australia, including specialty Kid’s Milk launched by Australia’s Own last year in China and now a category leader.
«With a forecast significant increase in Kid’s Milk demand we will install additional high speed 200-millilitre packaging capacity at Freedom’s new Ingleburn (Sydney) site in 2017,» Mr MacLeod said.
Just over half the retail entitlement shares on offer, worth about $35 million, are expected to be bought at $4.45 each by Freedom’s cornerstone investor Arrovest, which is owned by co-partner with Freedom in the Australian Fresh Milk Holdings production business.
Freedom enjoyed a 1300 per cent share price lift in the past five years, some market observers are uneasy it has already relied heavily on $125 million from capital raisings in the same period to pay for its expansion push.
Freedom’s gross profit margins slipped from 36.2 per cent in 2014-15 to 29.7 per cent in 2015-16.
It reported an operating profit of $10.8 million for 2015/16.
Source: Ad.FarmOnline
Link: http://adf.farmonline.com.au/news/magazine/industry-news/general/freedom-foods-hold-china-dairy-formula/2754459.aspx
